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2016 (1) TMI 118 - ITAT MUMBAI

2016 (1) TMI 118 - ITAT MUMBAI - TMI - Electricity duty exclusion while calculating the transfer price of electricity duty for computing the deduction u/s 80IA - Held that:- This issue has been decided in favour of the assessee by the Tribunal rder in assessee’s own case for AYs 2002-03 to 2005-06 [2014 (7) TMI 554 - ITAT MUMBAI ] wherein held as we do not find any reason for excluding the element of tax and duty while determining the “market value” of the electricity price per unit supplied by .....

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- This issue has been decided against the assessee by the Tribunal in assessee’s own case for the earlier years wherein held that the present issue has been decided by the Tribunal against the assessee right from the assessment year 1999–2000 to 2001–02. The Assessing Officer has apportioned indirect expenses which are to be reduced from the profits of the power unit as worked out in detail at Page–20 of the assessment order. This allocation of indirect expenses to arrive at the profit of power .....

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the Tribunal in the earlier years on the ground that it is purely an alternative claim as the claim for deduction u/s 80IA with regard to unit no. 6 has been allowed, therefore, no separate adjudication is required as admitted by the assessee. Accordingly, in this year also this alternative claim of the assessee is treated as dismissed, being infructuous. - Decided against assessee

Disallowance of employees contribution to ESI and Provident fund made after due date - Held that:- out .....

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Disallowance u/s 14A on account pro-rated indirect expenses - Held that:- The assessee has earned dividend income of ₹ 48,74,295/-(treated as exempt) as compared to AY 2004-05 which has been dealt by the Tribunal wherein the assessee has earned dividend income of ₹ 7.87 lakhs. The Tribunal has worked out the disallowance on account of administrative expenses after considering the director’s fee and auditor’s remuneration vis-a-vis the earning of dividend income. If we analyz .....

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partly in favour of assessee

Addition of profit on sale of investment and reduction of loss on fixed assets in computing the book profit u/s 115JB - Held that:- this issue stands covered against the assessee by the Special Bench decision of the Tribunal in Rain Commodities Ltd. v/s DCIT, [2010 (7) TMI 794 - ITAT HYDERABAD ]. Thus, respectfully following the decision of the Special Bench of the Tribunal, we confirm the addition on account of profit on sale of investment in fixed asset .....

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ld be included while computing the book profit. Since we have already confirmed the disallowance of ₹ 50,000/-, therefore, the same shall also be included in the book profit.- Decided against assessee

Generation of steam amounts to formation of power or not so as to be eligible for claim of deduction u/s 80IA for Unit No. 6A and 6B - Held that:- The section provides that the assessee must begin to generate power during the period defined under the statue and the impugned assessm .....

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Unit–6 also as a stand alone power generating undertaking. - Decided in favour of assessee

Allowability of expenses incurred on repair and maintenance of the building - Held that:- The assessee had taken office on lease and to make it fit for use the aforesaid expenses were incurred on plastering, polishing, false ceiling, electrical fittings, fresh carpets etc. These expenses were incurred on the assets not owned by the assessee. The expenditure in question is to give a better look .....

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he addition - Held that:- The finding of fact as recorded by the learned Commissioner (Appeals) that after making the adjustments made by the assessee in the opening stock and purchase and sale, the net effect is nil appears to be based on fact. Thus, we do not find any reason to deviate from such findings of fact which has not been rebutted - Decided in favour of assessee

Allowability of deduction u/s 80HHC while computing the book profit u/s 115JB - Held that:- This ground now stand .....

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ay Mehta ORDER PER AMIT SHUKLA, JM: The aforesaid cross appeals have been filed by the assessee as well as by the revenue against impugned order dated 11.02.2011 passed by CIT(A)-2, Mumbai for quantum of assessment passed u/s 143(3) for assessment year 2007-08. We will first take-up assessee s appeal vide which following grounds have been raised:- 1. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals was not justified in holding that electricity duty should be excluded .....

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f integrated Power Unit No. 6 if in the unlikely event the claim for deduction u/s 801A in respect of Power Unit No. 6A & 6B is ultimately not allowed in favour of the company. B. Disallowance of Employee s Contribution to Provident Fund & ESI Fund. 4. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals was not justified and grossly erred in confirming the disallowance of employee s contribution to Provident Fund and EST Fund amounting to ₹ 43,23,169/-made a .....

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rather grossly erred in computing the disallowance u/s 14A as per Rule 8D without appreciating the fact that Rule 8D is not applicable in the instant assessment year. 5© That on the facts and in the circumstances of the case and without prejudice to the ground 5(a) & 5(b), the Ld. CIT(Appeals) ought to have given directions to consider only those investments on which the appellant has earned exempt income in computing disallowance u/s 14A as per Rule 8D. 5(d) That on the facts and in t .....

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n provision basis amounting to ₹ 50,65,630/- E. Disallowance of profit/loss on sale of fixed assets and investment in coming Book Profit u/s 115JB 7. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming the addition of profit on sale of investment and reduction of loss on fixed assets in computing Book Profit u/s 115JB. F. Disallowance of expenses incurred for earning exempt dividend income in computing Book Profit .....

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ground of appeal u/s 246A. 2. At the outset, Ld. Counsel for the assessee submitted that most of the grounds raised by the assessee are covered by the decision of Tribunal in assessee s own case right from the assessment year 2002-03 to assessment year 2005-06, except for issue raised in ground no. 4 relating to disallowance of employees contribution to PF, which is covered by the decision of Hon ble Bombay High Court. 3. The Ld. DR has also admitted that most of the grounds raised by the asses .....

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nsfer price of electricity duty for computing the deduction u/s 80IA. 6. This issue has been decided in favour of the assessee by the Tribunal vide order dated 30.05.2014 in assessee s own case for AYs 2002-03 to 2005-06. The relevant conclusion and finding of the Tribunal as given in para 32 and 33 reads as under:- 32. We have heard the rival submissions and also perused the relevant findings of the authorities below and the material available on record. The assessee has worked out the notional .....

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king out the sale price of the electricity supplied by its power unit to the paper division. Besides this, he has also apportioned indirect expenses on the basis of the total turnover for quantifying the deduction under section 80IA claimed by the assessee in respect of power units no.3, 4 and 5. This apportionment of indirect expenses is a separate ground which is ground no.9 and the same shall be discussed subsequently. The basic issue in ground no.8 is what should be the transfer price for th .....

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mining the market value of such transfer. The said section in other words, empowers the Assessing Officer where the transfer of goods and services as recorded in the accounts of the eligible business does not correspond to the market value, then the profits declared for the eligible business can be adjusted by the Assessing Officer on such basis so as to ensure that the goods and services are transferred to its own unit at the market value of such goods and services. In the Explanation to sectio .....

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ilable for the public at large. In the present case, the market value of supply of electricity by power unit of the assessee to the paper division of the assessee has to be seen from the angle, if the paper unit has to purchase the electricity directly from the Karnataka Electricity Board (as both the power units as well as the paper units are situated in Karnataka), then what is the price which would be paid by the paper unit to the Karnataka Electricity Board. The transfer of the price as cont .....

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s and duties are part of the price at which the power / electricity is supplied by the Karnataka Electricity Board to the paper division, then the same price is the indicator of the market value which is fetchable in the open market. We do not find any reason for excluding the element of tax and duty while determining the market value of the electricity price per unit supplied by the power unit to the assessee as contemplated in sub-section (8) of section 80IA. 33. Coming to the arguments of the .....

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or determining the market price because the terms and conditions in which the Karnataka Electricity Board is procuring the electricity from such parties is not known. Further the market price has to be seen as a price at which the customers are getting the electricity in the open market. That should be the criteria for bench marking the market price under section 80IA(8). As pointed out by the learned counsel that in the earlier years, there are two different opinions and conclusions drawn by th .....

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r decision purely on the basis of our interpretation of statutory provisions, sans going by any earlier year precedence. Thus, in our opinion, we have to follow the provisions as contained in section 80IA(8) for determining the market price, which cannot be arrived by reducing the price by any other factors like taxes, duties, etc., as the same are embedded in the price. Thus, we set aside the impugned order passed by the learned Commissioner (Appeals) on this issue and allow the ground no.8, is .....

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the facts and in the circumstances of the case the Ld. CIT(Appeals) was not justified in holding that for computing deduction u/s 80IA, the prorated indirect expenses of the company should be reduced from the profit of the Power Unit. 35. After hearing both the parties, we find that the present issue has been decided by the Tribunal against the assessee right from the assessment year 1999-2000 to 2001-02. The Assessing Officer has apportioned indirect expenses which are to be reduced from the pr .....

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ew taken in earlier years, this issue is decided against the assessee. 11. In ground no. 3, the assessee has challenged the alternative claim of deduction u/s 80IA in respect of integrated power unit in case the claim for deduction for power unit No. 6A & 6B are not allowed. 12. This issue has been treated as infructuous by the Tribunal in the earlier years on the ground that it is purely an alternative claim as the claim for deduction u/s 80IA with regard to unit no. 6 has been allowed, the .....

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under the relevant statute, therefore same were not allowable. The aggregate of such amount which was not paid beyond the due date was ₹ 43,23,169/-, the details of which are as under :- Month Amount (Rs) Date of Payment April 30,827 24.05.06 May 30,777 21.06.06 June 29,713 20.07.06 July 28,549 17.08.06 August 28,702 18.09.06 September 28,502 18.10.06 October 28,574 16.11.06 November 26,617 19.12.06 December 39,38,314 16.01.07 December 26,403 18.01.07 January 25,043 20.02.07 February 21,6 .....

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B. 16. Before us, the Ld. Counsel submitted that, except for two payments of ₹ 30,827 for the month of April, 2006 and ₹ 30,777/- for the month of May, 2006, the assessee has deposited the entire sum within the grace period, as provided in the relevant statute. So therefore, to the extent of ₹ 42,61,565/- which has been deposited well within the due date, same should not be disallowed. Further, in any case now in view of the decision of Hon ble Bombay High Court in the case of .....

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Extrusions Ltd, reported in [2009] 319 ITR 306 and also relied upon its own decision in the case of CIT vs Hindustan Organics Chemicals Ltd., judgment and order dated 11.07.2014 passed in ITA 399 of 2012. 17. On the other hand, Ld. DR strongly relied upon the order of the CIT(A) and also the decision of Gujarat High Court in the case of CIT vs Gujarat Road Transport Corp., (reported in [2014] 41 taxmann.com100), judgment and order dated 26.12.2013. 18. We have heard the contention of the parties .....

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ited above, we hold that all the impugned payment is to be allowed as the same is covered by the amendment to section 43B. Accordingly, ground no. 4 is treated as allowed. 19. In ground no. 5, the assessee has challenged the disallowance u/s 14A on account pro-rated indirect expenses. It has been submitted that, said disallowance has been made by the AO and confirmed by the CIT(A) after invoking the formula laid down in 8D, which is not applicable for AY 2007-08. Further, the Tribunal in assesse .....

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case. The assessee has, admittedly, huge interest free surplus funds, which is evident from the fact that it has its own funds of ₹ 149.29 crores. Besides this, it also had sum of ₹ 63.20 crores on account of retention of sales tax difference in this year. In view of such huge surplus funds, the investment to the tune of ₹ 49 crores that too major portion is coming from the earlier years, it can be said to be made out of the surplus funds only. Thus, according to the principles .....

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been incurred for the purpose of investment in shares, etc. At the most, directors fees and expenses and auditor s remuneration can be said to be attributable for the purpose of disallowing the administrative expenses for the purpose of earning exempt income on the investments made. From the details mentioned above, it is seen that the directors fees and expenses is ₹ 13 lakhs whereas, auditor s remuneration is ₹ 5.53 lakhs. If the ratio on which the Assessing Officer has worked out .....

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relevant finding given in the impugned order and also the reasoning given in the order of the Tribunal, we find that the assessee has earned dividend income of ₹ 48,74,295/-(treated as exempt) as compared to AY 2004-05 which has been dealt by the Tribunal wherein the assessee has earned dividend income of ₹ 7.87 lakhs. The Tribunal has worked out the disallowance on account of administrative expenses after considering the director s fee and auditor s remuneration vis-a-vis the earni .....

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essee at ₹ 8,187/-. Thus, ground no. 5 is treated as partly allowed. 21. Ground no. 6 has not been pressed, accordingly, same is treated as dismissed. 22. In ground no. 7, the assessee has challenged the addition of profit on sale of investment and reduction of loss on fixed assets in computing the book profit u/s 115JB. 23. Admittedly, this issue has been decided against the assessee by the Tribunal in the earlier years in the following manner: 232. We have heard the rival contentions and .....

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y reason to deviate from such findings of fact which has not been rebutted and, hence, the ground no.6(i) and 6(ii) raised by the Revenue stand dismissed. 233. Ground no.7, reads as under:- 7. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the addition of profits on sale of investments of fixed assets in computing book profit u/s. 115JB. 234. After hearing both the parties, we find that this issue was decided in favour of the assessee by the Tribun .....

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aforesaid ratio, this issue is decided against the assessee. Accordingly, ground no. 7 is treated as dismissed. 25. Ground no. 8 is with regards to disallowance of expenses incurred for earning of exempt dividend income i.e. disallowance u/s 14A whether to be included while computing the book profit. 26. This issue would be decided against the assessee in view of the decision of Hon ble Delhi High Court in the case of Goetze India Ltd. in ITA No. 1179 of 2010, wherein Hon ble High Court has held .....

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ssessee is treated as partly allowed. 28. In the result, appeal of the assessee is partly allowed. 29. Now, we will take-up revenue s appeal in ITA No. 3843/Mum/2011 for AY 2007-08, vide which following grounds have been raised :- 1. Whether on the facts and in circumstances of the case and in law, the CIT(A) Erred in that captive power consumption from generation set would be Eligible for deduction u/s.8O-IA. 1.2 Whether on the facts and in circumstances of the case and in law, The CIT(A) erred .....

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er pricing rate for claiming deduction u/s.801A. 2. Whether on the facts and in circumstances of the case and in law, The CIT(A) erred in deleting the disallowance of expenses incurred on repairs and maintenance of building amounting to ₹ 18,96,639/-. 3. Whether on the facts and in circumstances of the case and in law, the CIT(A) erred in deleting the addition of unutilized Modvat credit to The value of closing stock of raw material in view of the provisions of Sec. 145A 4. Whether on the .....

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decided by the Tribunal in the earlier years, wherein the Tribunal following the precedence of earlier years and had been consistently deciding this issue in favour of the assessee right from AY 1997-98 onwards. Hence, consistent with the view taken in the earlier years, we decide this issue in favour of the assessee and against the revenue. 32. Similarly, the issue raised in ground no. 1.2, whether the conditions of provision of section 80IA(3)(ii) are satisfied in respect of DG sets or not. 33 .....

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eciding the impugned issue by observing and holding as under:- 20. We have heard the rival contentions perused the findings of the authorities below as well as the material available on record. The assessee s claim under section 80IA, with regard to unit no.6 is that it has installed a power unit in the form of chemical recovery boiler for the generation of steam. This steam is used firstly, to rotate the turbine which generates electrical power for the assessee which is used in the paper manufa .....

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be held that the said undertaking on a standalone basis has been set-up for generation of power or not within the meaning of section 80IA(4)(iv). The relevant clause (iv)(a) of section 80IA(4), reads as under:- (a) Set up in any part of India for the generation and distribution of power if it begins to generate power at any time during the period beginning on first day of April 1993 and ending on 31st day of March 2006. 21. Thus, the statute contemplates generation of power or generation and dis .....

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thermal or any other form of energy. The Income Tax Act, 1961, does not define the word power . The new Oxford Dictionary of English defines the word power as energy that is produced by mechanical, electrical or other means which is used for operating device. Otherwise also, generation of steam is a kind of energy which can be converted into mechanical or electrical energy from which power is generated. To say that the generation of power is only restricted to generation of electricity alone, is .....

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ing and term of power and thereafter, observed and concluded as under:- The word power used in s. 80-IA(lV) has not been defined in the statute, then the common parlance meaning as per the dictionary is normally taken into account. The word power has to be given a meaning which is in common parlance and in common parlance the word power shall mean the energy only. The energy can be of any form, be it mechanical, be it electrical, be it wind or be it thermal. The steam produced by the assessee on .....

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ilable in steam is used to rotate the turbine, the turbine then rotates the alternatar which generates electrical energy. The steam after being used to rotate turbine is drawn from the turbine outlet and then finally used. In this background, the steam so generated is generated by the industrial undertaking and the receipt would be the receipt from the business of the industrial undertaking within the meaning of s. 80-IA which would qualify for this benefit. The assessee, therefore, succeeds on .....

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below:- 5. Considering the above submissions, we find substance in the arguments of the learned Authorised Representative that like electricity, steam is also a form of power as per the dictionary meaning reproduced by the learned CIT(A) at pp. 5 and 5 (sic) of the first appellate order. We also concur with the view of the learned Authorised Representative that there is little room for any doubt that scientifically or in general parlance, production of steam and generation of steam ; or for that .....

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ntention of the legislatures by referring to s. 80IA(4)(iv)(b) to infer that intention is to provide benefit to the generation of electricity only, since in the sub-cl. (b) transmission and distribution lines are mentioned which can be of electricity only. Submission of the learned Authorised Representative in this regard to which we also agree remained that sub-cls. (a), (b) and (c) of s. 80IA(4)(iv) provide for deduction in the cases of three types of undertaking viz. the one which is engaged .....

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e, inference need not and cannot be drawn from the other subclause. On perusal of these provisions, we agree with the plea of the learned Authorised Representative that case of the assessee falls in sub-cl. (a) itself and the legislative intent inferred by the AO with reference to sub-cl. (b) is superfluous, just like there is transmission or distribution lines for electricity there are transmission and distribution lines for steam too. Therefore, there is no basis whatsoever for drawing distinc .....

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by using the connotation electrical power only rather than the connotation power omnibus. As per Chambers twentieth century dictionary, steam-power; is a spell of travel by steam power; energy, force, spirit for, using, worked by steam; to rise or pass off in steam or vapour, or smell; to become dimmed with condensed vapour (often with up); to move by means of steam. As per the Cambridge International Dictionary of English, the steam is the hot gas that is produced when water boils; steam can be .....

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common parlance the word power shall mean the energy only. The energy can be of any form, be it mechanical, be it electrical, be it wind or be it thermal. The steam produced by the assessee on the principle of interpretation of statute shall only be termed as power and shall qualify for the benefits available under s. 80-IA(iv), held the Tribunal. Under these circumstances, we fully concur with the decision on the issue arrived at by learned CIT(A) that assessee is in the business of generation .....

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id to be for generation of power. The basis on which the learned Commissioner (Appeals) has tried to distinguish the decision of Sial SBEC Bio Energy Ltd. (supra) is very superficial. What needs to be seen is, whether generation of steam can be said to be generation of power or not, then, the finding and the conclusion drawn by the Tribunal in the aforesaid decision after referring to the catena of decisions and various other provisions clearly clinches the point. Now coming to the other observa .....

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ated at a realisable market value by the assessee in its books of account and the assessee has also debited expenditure incurred for the generation of power. Thus, on these facts itself, it cannot be held that the assessee has not undertaken the generation of power in this year. The section provides that the assessee must begin to generate power during the period defined under the statue and the impugned assessment year definitely falls within that period. Lastly, insofar as the observation and .....

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assessee is thus treated as allowed . 37. Thus, respectfully following the same, we decided this issue in favour of the assessee and against the revenue. 38. The next issue raised vide ground no. 1.4, whether the rate as per cost Audit report is justified for adoption of higher transfer pricing rate of electricity for claiming deduction u/s 80IA. 39. This issue has been decided in favour of the assessee by the Tribunal in the earlier years, which is also similar to ground raised by the assessee .....

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IT(Appeals) was not justified in holding that expenditure in respect of Bangalore office taken on lease to the tune of ₹ 50,136/- are capital expenditure. 41. The assessee, during the assessment year 1999-2000, had acquired property at Bangalore on lease. For repair and maintenance of the new Bangalore office, it had incurred a sum of 2,14,075 during the assessment year 2002-03. The Assessing Officer, after holding it to be capital expenditure, disallowed the said expenditure. 42. The lear .....

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are as under:- 7. The next dispute relates to the disallowance of expenditure in respect of new Bangalore office taken on lease. The amount so spent for A.Y. 2000-01 is 36,68,591 and for A.Y. 2001-02 is 4,29,052. We have heard both the sides and have gone through the record. The assessee had taken office on lease and to make it fit for use the aforesaid expenses were incurred on plastering, polishing, false ceiling, electrical fittings, fresh carpets etc. These expenses were incurred on the asse .....

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ar 2000-01 and 2001-02, we set aside the impugned order passed by the learned Commissioner (Appeals) and allow the ground no.13, raised by the assessee. 42. Thus, following earlier years precedence this issue is decided in favour of the assessee and against the assessee and against the revenue. 43. In ground no. 3, the revenue has challenged the deletion of addition on account of unutilized Modvat credit to the value of closing stock of raw material in view of provisions of section 145A. 44. Thi .....

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tation, the assessee has dully made the adjustment in the opening and closing stock and also the other adjustment in purchases and sale. Based on this factum, the learned Commissioner (Appeals) deleted the said addition as the net effect was nil . He also submitted a copy of the Tribunal order in MIRC Ltd., in ITA no.849/Mum./2010, order dated 13th March 2013, in support of his contention. 231. The learned Departmental Representative relied upon the order of the Assessing Officer. 232. We have h .....

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